Ofgem to Increase Licensing Requirements for New Energy Firms
After a number of new energy suppliers folded over the past year, Ofgem have decided to update the licensing requirements. The UK’s industry regulator is tightening the rules for any firms seeking to begin trading in gas and electricity.
New Energy Suppliers Ceasing Trading
Ofgem believe there have been too many new energy firms ceasing trading over the last twelve months. The latest supplier to cease trading is Economy Energy, who abandoned their 235,000 customers to the care of Ofgem.
New suppliers that failed to stay the course over the past year include Usio, Future and National Gas and Power. Other new suppliers that have recently ceased trading include Iresa, Gen4U and One Select.
Spark Energy are another who ceased trading in November 2018. Despite boasting an impressive 290,000 customers for a small firm, they folded after failing to pay a £14 million bill. The bill had been served on them by Ofgem themselves for non-payment of its renewable power obligation. It is understood that Ovo Energy moved to secure their customers.
Ofgem’s Energy Safety Net for Abandoned Customers
Also folding last November was Extra Energy who supplied 108,000 domestic customers and 21,000 businesses. Ofgem once again employed their energy safety net to ensure the customers were not left without gas and electricity.
Via their Interim Director for Future Retail Markets, Philippa Pickford, Ofgem published advice for worried customers. The statement read:
“If you are an Extra Energy customer, under our safety net, we will make sure your energy supplies are secure. We will also ensure that domestic customers’ credit balances are protected.
“Ofgem will now choose a new supplier and ensure you get the best deal possible. Whilst we’re doing this our advice is to ‘sit tight’ and don’t switch. You can continue to rely on your energy supply as normal. We will update you when we have chosen a new supplier who will then get in touch about your new tariff.”
Licensing Arrangements Have ‘Room For Improvement’
Ofgem’s Executive Director for Consumers and Markets, Mary Starks, was interviewed on BBC Radio 4’s Today programme about the matter. She said she believed there was ‘room for improvement’ in the current energy licensing regime for new suppliers.
Ms Starks continued, saying
“We are conducting a review of our licensing arrangements at the moment, with a view to strengthening our requirements to raise standards in a couple of areas, particularly around customer service and financial resilience.”
New Firms Must ‘Weather the Challenges’
Currently new suppliers must meet certain financial requirements as well as being subject to rigorous background checks. Ms Starks confirmed one new requirement that would be implemented. It would be an examination of a new firm’s ability to ‘weather the challenges in this market’. This would especially concern the potential for wholesale energy prices to increase.
Ms Starks remained positive about the UK energy market on the whole. She emphasised that there were now sixty smaller energy suppliers taking on the Big Six suppliers compared with just a dozen or so a few years back. Also highlighted were the better deals to be found for customers who are willing to shop around and switch suppliers.
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